Best Western Hotel Kuta Accused of Tax Avoidance

Best Western Hotel Kuta in Bali Hounded by Legislators for Being Unlicensed and Under Taxed is Threatened with Closure.

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(3/7/2011)

The beleaguered Best Western Hotel Kuta which was constructed without zoning permission in an area of Kuta where hotels and multiple residence structures are specifically prohibited, is now also coming under added scrutiny for a failure to meet its tax obligations.

A report in DenPost claims a number of tax-related issues have raised the suspicions of Commission C of the Badung regency House of Representatives (DPRD-Badung), the regency's revenue agency (Dispenda), the regencies tourism office (Disparda) and local law enforcement officials.

When questioned about his failure to obtain the required building permits, the hotel's owner has consistently pointed to his quarterly payment of taxes as proof of his good faith towards the local government. These quarterly payments of Rp. 45 million (US$5,000), which should represent 11% of the hotels total sales revenues, are now being highlighted by legislators as proof that the hotel owner is attempting to avoid his true tax obligation.

The chairman of Commission C for the DPRD-Badung, I Nyoman Satria, has pointedly calculated that a 110-room hotel with an average rate of Rp. 450,000 (US$50) would only be achieving an average occupancy of 10% if, in fact, the Rp. 45 million tax payment is a correct assessment of tax liability. Satria complained: "It's completely impossible that their occupancy is only 10%, especially when managed under a 'Best Western' brand. To break even the minimum occupancy of such a hotel would have to be 35%. If we take that minimum occupancy alone, the tax payment over three months should be more than Rp. 200 million."

Satria questioned the regency's tourist office, asking the actual occupancy figures for the hotel in order to obtain a truer picture of what contribution Best Western Hotel Kuta should be making to the regency's tax coffers.

In response, the head of the facilities and infrastructure division of the Badung Tourism Office, Nyoman Suardana, said his office has never enquired after the average occupancy of the Best Western Hotel Kuta. In defense of the lack of occupancy data from the hotel, Suardana said it was problematic for his office to check on any aspect of a hotel for which they have never issued a single operating permit.

The head of the Dispenda for Badung, I Wayan Adi Arnawa, told legislators that, in fact, the hotel has been paying a tax figure at least 3.5 time higher than that published in the press. Adding, "however, I can disclose the exact amount because according to law that is secret data."

Following the meeting with lawmakers, Arnawa admitted to the press that there were indications of tax avoidance by the Best Western Hotel Kuta that were still being looked into by his office.

Separately the head of the regency's enforcement agency (SATPOL PP Badung), Ketut Martha, said that the regent of Badung, A.A. Gde Agung, had already verbally ordered strong steps against hotels built without zoning permission, including the closure of the erring hotels. Martha said that closure and sealing of hotels might commence in the days following Nyepi which falls on March 5, 2011.

He said that before a hotel can be closed and sealed, however, careful administrative and judicial steps must be undertaken first in cooperation with the regent's legal department. Still, Martha told the press there is every possibility that the Best Western might soon be forcibly closed.